INSEAD’s Ilian Mihov Imagines The Future

You talk about business as the main engine for positive social change, lifting people out of poverty around the world. Why then is business viewed with suspicion by so many? Why the lack of trust in the business elite? And what can INSEAD and other business schools do about it?

In my view as an economist, the answer is because of when markets actually fail, and markets fail often. So we see tensions between business and society increasing when, for example, there are issues about sustainability, when there is pollution. It used to be that companies can take clean air and pollute and nothing happens. That created one tension. Markets failing to deliver goods and services to the poorest part of the population, because the pricing mechanism does not get them to be able to buy these things — that is another tension. Institutional economic structures fail when the incentives in the organizations are such that the top people can behave in a very unethical way.

So why we decided to do is to say, “Let’s start an institute for business and society where we look at all these different market failures and economic structure failures, and we’ll do research and prepare teaching materials and so on.” But the most important part is to try through this to change the way people think about how you do business, in the following way: When our students, our alumni go out and start making decisions, obviously you have to create value for the company, otherwise the company will go bankrupt. But in this process of value creation you have to start thinking as well, “What is the impact you are creating in society?” And sometimes it’s difficult because there are so many different externalities that you create. Some of them are positive, some of them are negative. Building awareness about these additional effects or impacts on society can then make business figures think, “Can I change my business model — can I change something — so that in the process of value creation for the company, I can also create value for society?”

Sometimes pure awareness about these issues will do miracles. We want to make sure that people will explore this. Sometimes it will not be enough, because sometimes the effect will be negatives; and sometimes, even though people want to do something better or behave in a way that they think is better, costs may prohibit a change in behavior. “My costs will increase because everyone else will continue behaving in the same way and then I’ll be driven out of business.”

And there is room for regulation. Regulation is an important component for solving some of these issues. I think the clearest example is sulfur dioxide, which used to be one of the key pollutants 40, 50 years ago. Today nobody is talking about sulfur dioxide because we have regulations and we have all these permits to pollute. So there is a mechanism. But it’s very important to realize that regulation cannot solve everything. So the first step where business makes its decisions in the best possible way is very important. You can’t regulate every little thing — but also if people are not convinced that they have to do this or that, you put regulation on them, they’ll find a way around it. We see that all the time.

How will INSEAD address the issue?

We created a cluster of courses on business and society, and we’re creating all kinds of programs and all kinds of interventions. And then there are the talks here and elsewhere as well. The idea being that we want to change the norms that apply to business today, and norms are things that change over time. Somehow we believe that the world we live in, all of the norms are God-given and things have always been this way and always will be this way. But when you think about it, norms are changing all the time. Fifty, 60 years ago, you go to business school, most business schools would have only men in the classroom.

In terms of beliefs and norms, there were so many men who believed at the time that women do not have to get a business education. Today nobody thinks like this.

That’s a good segue for my next question: It’s a big year for INSEAD, the 50th anniversary of your first female admit. Talk about that a bit if you would, and about INSEAD’s struggles to get a higher proportion of women in its student ranks.

It is a very important year. In 1967, the first two women joined INSEAD, Hélène Ploix and Solange Perret, and out of a class of about 120 students they represented less than 2%. Today we are at 33%, so things have changed, obviously. We have two classes of about 500 students so we have more than 1,000 students every year, so in actual numbers we’re the third-largest supplier of female MBAs in the world. But in percentage terms we’re not where we want to be.

Will women ever reach 50% enrollment at a major business school? 

Right now my belief is that the goal should be gender parity. We have created a new Gender Initiative to explore the question, but at the same time we think it’s a failure of society that we have so many gender biases, and we’re trying to understand what business can do to minimize these. Within this Gender Initiative, what is really exciting is that there is so much great research using state-of-the-art methodologies, getting data, and trying to understand what is behind these numbers — pay gap and all these other things.

For INSEAD, we decompose the data, and we find that from the United States, we get 40-45% women; from China, 60% women. We realized that we have a much smaller percentage of women from European countries. Of course, we’re still a very European school. Then we go into each one of these countries — Germany, Italy, Spain — and we try to understand why fewer women apply. Obviously we have enough applicants, if we want to put the number to 40% or 50% we could, but we don’t want to do it just to say, “I have this number.” You want to do it in the right way.

So when we realized there are fewer female applicants from these countries, we have tried to understand why. And one hypothesis is that for INSEAD in particular, we are admitting students who are a bit older, average age around 29, and this may not be the optimal time for female students who may be considering starting a family around this time.

The second hypothesis is that in some countries, there aren’t enough role models for women. Why do women need an MBA? So we’re trying to reach out and do a lot of activities to answer that question.